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November 2014

Will they ever learn?

As production operations for electronic products continues to consolidate, so do their supply chains. The need for closer relations with major producers or distributors is growing. Just claiming to build a better mouse trap still does not work. Introducing products prematurely is a sure recipe for failure. It will also allow competitors to establish and implement a new strategy to prevent a successful market entry. Failing to keep promises or time commitments without advising customers is bound to cause grief. Believing that you know better than the prospect or customer or competitor can lead to lost opportunities. Not understanding the market, its history, its standards, the OEM requirements, future market and geographical trends that must be met and addressed as well as not-in-kind competition will be expensive. And, perhaps most importantly, one must offer attractive benefits for a switch as well as substantiate a clear value package that would allow a prospect to either establish a niche position or produce its products in volume at a lower cost.

Now is probably a good time to remind the providers of equipment, materials, and specialty chemicals that a "free sample" for trial is really not free to the prospective customer. It can cost tens or hundreds of thousands of dollars for engineering time, change-overs, labor, disruptions to normal schedules, test runs, reviews, adjustments, and data validation. so, it would probably be a good idea to carefully examine the value proposition for the specific customer in view of his operation before advancing for the trial and sale.

Major PCB chain sources in China are reporting an uptick in purchases and are now predicting a "better" 2015 in China for the industry. Foxconnhas just made a major SMT equipment purchase. Others seem to be following suit to meet demand for hand held devices. We'll have a chance to meet with some of them, their principals, and their customers at the HKPCA/IPCevent in Shenzhen, China right after Thanksgiving. There will be more than 500 exhibitors from 15 countries and regions with over 2,100 booths covering 45,000 square meters in two halls.

Further growth may be stimulated by this month's action of China's central bank, The People's Bank of China, cutting its benchmark one-year loan rate by a 0.4 percentage point and its one-year deposit rate by a 0.25 percentage point.

Murrietta Circuits of Anaheim hosted more than 100 invited guests including CTOs, senior design engineers, & senior corporate executives from Broadcom, Panasonic, Honeywell, Northrop Grumman, Boeing, and Sandia National Labs  at an open house to celebrate becoming the first eSurface* Certified Facility to establish a production line in Southern California for eSurface's advanced additive fine line multi-dimensional circuit board manufacturing system.

Guests were treated to live process demonstrations as well as refreshments. Earlier this year Murrietta received a Five Star Award for Supplier Excellence from Raytheon Integrated Defense Systems its second year in a row, and third year as an award winner. Murrietta is one of only 15 of Raytheon's 5,000 global suppliers to achieve this award.

*NOTE: Gene Weiner is an advisory board member of eSurface.

Will the following translate to a surge in attendance and orders at the HKPCA/IPC APEX event in Shenzhen, China next month?

The DigiTimes reports that PCB manufacturer Apex International saw its net profits jump 79.4% sequentially in the third quarter of 2014, while profits at HannStar Board reached the highest level in nine quarters. Tripod Technology also saw its net profits increase 49.7% sequentially and 26.5% on year to $25.7 million in the third quarter of 2014. Additionally, Flexible PCB makers Zhen Ding Technology and Career Technology both enjoyed another month of record revenues in October due to to rising shipments for mobile devices.

Meanwhile, in Japan, a sales tax increase pushed its economy back into recession last quarter. The country's real GNP shrank 1.6% on an annualized basis. As a result, the next tax increase will probably be delayed as companies shrank inventories and delayed capital investments. This will make Sony's (and other companies') survival even more difficult when it announces huge losses in April. One has to wonder how much of an effect the added tax burden of America's Affordable Care Act will have on its economy as it takes effect.

Have we already become less relevant? Will we become more so when the new trade agreement with China for reduced tariffs opens the door for more exports to the U.S.?

Oak-Mitsui will close its Hoosic Falls, NY embedded capacitor PWB material facility in February. Production will be shifted to its operations in Malaysia. It previously was a major supplier of copper foil to Cu clad laminate and multilayer board makers in the U.S. That leaves the company's ED copper foil facility in South Carolina as the only such manufacturer remaining in the U.S. Does this bother anyone? Does anyone remember Clevite, Mica, Dynachem? Are the sources of any other material or component critical to America's electronic defense no longer made in the U.S.?

A recent article by Junko Yoshida states that the U.S. and Europe are becoming irrelevant in the global smart phone market. In the past quarter Xiaomi edged out Lenovo and LG for third place behind Samsung (#1) and Apple. ZTE and Huawei Technologies are increasing their efforts to establish brand recognition in overseas markets. So is The latter is sponsoring some of Europe's soccer leagues and has made it in the list of Europe's top 100 brands this year. ZTE has signed several sponsorships with NBA teams such as the New York Knicks and Golden State Warriors. Meizu Technology is pushing its brand through social networking websites (e.g., Facebook). - - - Does anyone remember Motorola?

Intel continues to advance the internet of things demonstrating new wireless instant communications through new EHF radio technologies, face recognition advances, 3-D cameras, and power "bricks" that can transfer power to or recharge devices without physical contacts or linkages.

October 2014

The 100 plus that attended IPC's Tech Week at the end of the month reaped many benefits. They were updated on contract law by Jeff Roth of the F&B Law Firm, P.C. during the EMS Management Council Meeting; had a good look at the future - rapidly changing supply chain and growth for storage, automotive, as well as for tablet and smart phone packaging - by Prismark's Managing Partner Brian Swiggett*; got and outstanding quality "workshop" on advanced troubleshooting - cause, effect, and prevention - for PCB fabrication and assemblyby Mike Carano of OMG; had a total  CALCE (Center for Advanced Life Cycle Engineering) review of the status of tin whiskers under the leadership of Dr. Michael Osterman of the University of Maryland; got a preview of the IPC's near term focus** decided at the board of director's meeting; had a chance to chat with 5 of the IPC's board members, and had a broad spectrum of packaging options and challenges presented at the Electronic Systems Technologies Conference put together by Intel's Dr. Senol Pekin.***

*Swigget asked, "Who is providing leadership in our industry? It is no longer IBM!" He also commented that the electronics industries have evolved to a winner take all philosophy with the continual drive for lower costs at higher performance.

**One of the four areas of concentration disclosed was training and education.

***It was easy to find something of interest in various technical sessions or capstone sessions on reliability, materials, components, packaging, assembly and product development, the workshop on Advanced Packaging, and the Executive Session where HBR case studies on Qualcomm, TSMC, Intel, and Applewere reviewed.

From foundry and components to board assemblies and complete systems, the Electronic System Technologies Conference covered all phases of product development and brought together experts and the industry to ultimately offer a “Journey into the Future with the Titans of the Industry.Uniquely positioned to attract the entire electronics industry, the conference rose up once more as an excellent opportunity to network with the key people in the industry.

Shanghai PhiChem, parent company of PhiChem Americawent public this month on the Shenzhen Exchange, the Chinese equivalent of NASDAQ which has more than 400 listed companies. PhiChem, a specialty chemical manufacturer for the electronics industries founded by Dr. Jin Zhang in 2002, is China's largest provider of UV curable coatings for fiber optic cables. It is also the world's 2nd largest provider of these products. The company also makes other process chemicals and raw materials used by the IC,LED and PWB industries.

The TPCA show in Taiwan has a record number of exhibitors due to the combination of several related fields of endeavor in electronic circuit manufacturing and packaging including: Surface finishing, IC packaging, thermal management, and green technologies.

Pictured above at the opening of the TPCA show are the leaders of the world's electronic interconnect industry trade associations as well as invited honored guests including the Vice President of Taiwan. (Photo courtesy of the TPCA and Taiwan Kong King)

On the first day of the event the  TPCA released its white paper outlining plans to propel annual output values to above the $37.8 billion benchmark across the domestic printed circuit board (PCB) industry by 2020. Exhibitors and attendees future equipment orders from the huge new Foxconn display and printed circuit assembly plants being built in Hubei as the company seeks to gain more business from Apple.

Big news - Who benefits the most? Who will protect the innocent (chip users)? Is leaving America "foundry-less"* good for the United States?

IBM will "sell" its chip operations to GlobalFoundries according to a joint statement by the companies. IBM will pay "the buyer", owned by the government of Abu Dhabi,  a reported $1.5 billion over the next three years to take the chip manufacturing business "off its hands".

*The world's dozen or so leading chip foundries that account for more than 90% of global production (including IBM) will all be foreign owned when this deal is completed.


Back to the future


Lockheed is reported to have three captive PWB shops in the U.S. Northrup Grumman has an in-house board operation. Whelan Engineering is establishing a new highly automated in-house PWB operation in New Hampshire. Expected benefits include improved quality and a shortened supply chain as well as substantial cost savings over boards currently imported from China. Intel is said to be planning a new captive board facility in Arizona and said to be offering a bounty for "successful" job referrals. Is it to develop new technology that independent shops cannot afford? Is it for secrecy? Is it to shorten supply lines? Is it to gain time to market or some other competitive advantage? Is it the start of a trend?

WKK Distribution Ltd. was awarded a 2014 Global Technology Award in the category of Best Distributor – Asia during SMTA International.

Is it still just the price?

After visiting the Design-2-Part Show  (D-2-P) we revisited the concept of using value propositions to offset cheaper prices. We were astounded at the number of people that effectively stated that they would buy the cheapest system rather than the lowest cost equipment. Yes, there IS a difference, and sometimes the added cost of using the cheapest system is substantial. We also found that those that bought the newer system with greater productivity, ease of use, updated software, and smaller footprint often ordered more of the units of the newer system after a short (several months) of running production along side of the "older" competitive models who tried to protect their business by simply lowering the price and promising future improvements.

Some things just never seem to change. When one visits some of the leading board makers making advanced substrates and assemblies in Asia today, one usually sees the latest production equipment. Then I thought of the New Jersey manufacturer that I met at D-2-P show, and wondered what I will see when I visit a new "highly automated" board maker in the U.S. next month.

CEATEC JAPAN 2014, the Combined Exhibition of Advanced Technologies (CEATEC) which was held at Makuhari Messe in Chiba Prefecture, Japan October 7th - 11th appears to be following the shrinking footprint similar to the Consumer Electronics Show (CES) held in Las Vegas each year. See Dominique Numakura's (DKN Research) write up of the show on our comments page.

Move over Amazon

Dragon Circuits in Texas announced that it successfully completed 14 test runs of delivery by drone of packages weighing up to several pounds. It did not state thee range of the drones used in the test runs. Dragon has a drone division that builds a wide variety of these systems.

We need more industry participation and on campuses collaborations like the new Raytheon-UMass Lowell Research Institute (RURI).

Plans for the center were announced in August. It officially opened on the campus Friday, October 10, 2014 in the school's Mark and Elisia Saab Emerging Technologies and Innovation Center, the school's new $80 million research center.

Kyle Homan, a doctoral student in electrical engineering, gave a presentation on printable electronics and nanotechnology at the opening.

Raytheon has already embedded employees on site and plans to commit $3 to $5 million over 10 years to support the collaborative operation. It's a great way to move critical technology forward while simultaneously training candidates for the company*.

*Raytheon currently employs about 1,000 UMass Lowell alumni.

Have you seen the TPCA's (Taiwan Printed Circuit Association) first class promotional video on its interconnect industry?

Take nine minutes and watch the video on the following link.

協會簡介英文版 https://www.youtube.com/watch?v=8w_jIpYu54A

Did anyone notice?

An insurance company in Beijing, China bought the renowned Waldorf Astoria in New York City for a price of nearly $2 billion. Many American companies are worried about protecting their intellectual property as they ventured forth into the vast unknown of the China market. Others formed JVs or wholly-owned subsidiaries (with Chinese managers and labor). Some simply licensed technologies or sold their business units (e.g., IBM's personal computer operations to Lenovo*) to Chinese organizations. China, including its foreign-owned facilities, is now the world's leading producer of printed circuits. Yet, some are reluctant to enter their market choosing to protect their IP and gain a "large" share of smaller or shrinking markets rather than forge ahead and get a substantial piece of a larger pie while they can. China is now the world's largest cell phone market. The same is true for a variety of vehicles. China is also now America's largest creditor. It is acquiring major American assets other than those in our industry. I wonder. Will there come a day when China will not allow technologies that it does not own in part or wholly, directly or indirectly, or are not made in China, to be sold in China?

*The Lenovo Group is increasing its challenge to HP's personal computer and printer operations. This could be one of the reasons for HP's decision to spin that unit off.

Do you wonder why the U.S. now produces less than 5% of the world's printed circuits?

A small New Jersey PWB fabricator exhibiting at the Design-2-Part Show in Marlborough, MA told me that he would not attend any of the forthcoming IPC events as it was "too expensive". He told me that he had not gone to an IPC meeting in several years. He stated that he could process HDI boards and high layer count MLBs with no problems. He stated that his minimum hole size was 150um (drilled mechanically) with a Pluritech that was "several" years old. I told him about some of the newer processes, equipment and developments in direct imaging, build-up processes, low stress electroless copper, and inspection. I asked how he would keep his operation up-to-date if he did not attend a major show populated by his suppliers and customers. His response was, "It's too expensive to attend." Then, "How much does the new equipment cost?" not, "What are the benefits?" not, "How many parts per hour can be processed?" not, "What is the resolution capability?" not, "What is the cost per part produced or potential savings per square foot?" not, "How can it improve my yields?" and not, "What would I learn or see that would be necessary to not just survive, but to grow and thrive? How would this better prepare me to meet my customers future demands?"  All this in the face of news from the IPC Study on North American PCB Industry Forecasts Through 2017 that HDI/microvia boards experienced the highest growth rate there in 2013. I thought of an ostrich and almost asked him if he had heard of buggy whips*.

*See Bernie Kessler's (Bernard Kessler & Associates) comments on this one. We all speak of "value added". Does doing nothing compare to "value removed"?

Be sure to look at our "Comments & Discussion" page for Joe O'Neil's (Hunter Technology) and Dan Feinberg's remarks on the changing face of tomorrow's EMS and other industries!